Reverse mortgages are typically made available to those aged 62 or over, who own their own homes but are having trouble paying for day-to-day living expenses. Funds received from a reverse mortgage will not affect a person’s eligibility for most Social Security retirement benefits. However, the Supplemental Security Income is an exception to this, because this is a means-tested payment.

Reverse Mortgages May Impact Supplemental Security Income

Social Security payments are based on taxes that a person paid during their working life. Therefore, a senior who qualifies for Social Security does not have to worry about those payments being cut because they chose to take out a reverse mortgage. Supplemental Security Income, however, is means-tested and is aimed at those who have very little in the way of income or assets. While a reverse mortgage is a loan, it is still considered income for the purpose of Supplemental Security Income and certain other means-tested benefits or programs such as Medicaid. Seniors should contact their nearest Area Agency on Aging for information about how benefits work in their state.

Reverse Mortgages Carry No Monthly Payments

Unlike installment loans, when a person takes out a reverse mortgage, they don’t have to worry about making monthly payments on the loan. As long as the borrower lives in the property and meets their ongoing obligations (such as paying property taxes), they will not be expected to pay back the loan. Any expenses/interest will come out of the homeowner’s equity in the property.

A Reverse Mortgage Reduces the Equity You Have In Your Home

There are several fees associated with reverse mortgages, including arrangement fees and interest. Over time, this type of borrowing can dramatically reduce the equity a person has in their home. Seniors who are considering leaving the family home to move in with relatives or move into an assisted living facility should consider whether the cost of borrowing will be worthwhile in the long term.

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